As a Realtor focused on investments, I track trends in housing.
Some trends are set on solid fundamentals and other trends on shaking footings. Good data + demographics vs. bad advice + greed.
Bad advice and greed are a disastrous combination. Bulls make money, Pigs get slaughtered.
Currently there are a huge amount of condo assignments out in the market. It seems everyone and their (overseas?) uncle are trying to unload these assignments.
Assigning a condo is seen by some as a way to “flip contracts” and make quick money. They buy in early with a deposit on a pre-construction unit. The market appreciate’s while the 2-3 years of development occurs, then they sell (assign) the purchase agreement before needing to get the mortgage and close on the property.
Were all these assignment sellers hoping to cash in on the assignment flipping hype? Did they have the down payment, but not the ability to qualify for the stress tested mortgage?
Did they believe there was no downside risk? They thought they would just sell the assignment to someone else before they needed the mortgage, and they would make easy money; maybe even become “rich”.
I hope that isn’t what’s happening. If it is, they’ve all been caught now; especially in smaller (tiny) condo units.
Small units aren’t selling, causing the supply to outstrip the demand. The effect being seller desperation, declining prices or lowering rents on existing units.
Interestingly, we will not see these small, pre-con, condo units under power of sale because the builder will take the units back if the purchaser cannot qualify for mortgage on closing. The builder will keep their deposits and resell the unit on MLS: the Builder’s clause says the purchaser may not advertise the assignment for sale, but the builder is allowed to advertising their own available properties for sale.
These risky types of strategies have worked before. But they also end like kids caught with their hand in the cookie jar.
Investing and gambling are different. One uses skill, data, and strong fundamentals. The other is often pushed by those without experience, critical thinking, or scruples.
What the future holds is yet to be seen. In general, I’m confident the market will continue to rise, but if the tide goes out on certain asset classes, make sure you are wearing a bathing suit.